The NVDA share price dropped by approximately 5% to reach a nearly five-month low on Tuesday, following a Wall Street Journal report claiming that Nvidia may have to cancel up to $5 billion in advanced chip orders for China due to new U.S. government restrictions.
Nvidia was recently informed that its artificial intelligence (AI) chip orders, slated for delivery to major Chinese tech firms like Alibaba Group, TikTok owner ByteDance, and Baidu in the coming year, will be subject to the latest U.S. Commerce Department's export controls, the WSJ wrote, citing people familiar with the matter.
Nvidia's stock dipped as low as $392.30, marking a 4.7% decrease — the lowest point since mid-June.
Despite playing a substantial role in the Nasdaq index's 22% gain this year, Nvidia's stock is now nearly 20% lower than its all-time high close of $493.55 on August 31.
The company’s stock bounced back in early U.S. trading on Wednesday, gaining close to 1.5% to trade around $414.01 as of 9:45 EDT, as per MarketWatch data.
"These new export controls will not have a meaningful impact in the near term," the Nvidia spokesperson said in a statement quoted by Reuters on Tuesday.
There is "high demand" for the company’s advanced chips, many of which necessitate substantial lead time for production, according to the spokesperson. Nvidia is actively working to distribute orders among their "wide range of customers" in the U.S. and other locations.
Earlier this month, the Biden administration imposed export restrictions on the shipment of more AI chips created by Nvidia and other companies to China. This measure is aimed at preventing Beijing from acquiring cutting-edge U.S. technologies that could potentially enhance its military capabilities.
The new regulations are set to take effect in November and include export controls to countries like Iran and Russia.
Nvidia stock price forecast: Analysts say long-term value may trump short-term volatility
Tom Plumb, chief executive and lead portfolio manager at Plumb Funds, which has Nvidia as one of its largest holdings, told Reuters on Tuesday:
"The stock is getting oversold. Previously, Nvidia has said this is not going to have a short-term impact but it's more in the long term. We still expect a pretty strong quarter and think it's a great long-term holding, although we are not adding any new positions because of the volatility.”
Other market participants noted the sensitivity of the NVDA share price, such as Thomas Hayes, chairman at Great Hill Capital in New York, who told the news agency:
"I think Nvidia is priced for perfection and any trip off can have major impact when you have a stock that is trading at 20 times sales and 40 times earnings.”
Nvidia shares were rated as a Strong Buy by 38 analysts surveyed by TipRanks as of November 1. The average 12-month price target for NVDA stock stood at $645.53 — a potential 55.81% upside.
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